Canada’s largest bank is warning that housing has never been less affordable. New data from RBC shows housing affordability is now the worst it has ever been as of Q4 2023. Income failed to keep up with mortgage payments, resulting in affordability erosion in every market they track. Forecast interest rate cuts are expected to make a slight improvement, but not much.
Canadian Housing Affordability Has Never Been Worse
Canadian housing affordability has never been worse, according to RBC. A median household would need to spend 63.5% of its income to carry the mortgage on a “typical” home in Q4 2023. That’s a 1.7 point increase from the previous quarter, and the largest share ever. For context, the peak of the 1990s bubble was 57% of income—almost affordable in contrast.
Buying A House In Canada Has Never Been Harder
Canadian ownership costs as a percentage of median household income.
Source: RBC.
Every market tracked saw affordability erode, warns the bank. The markets with the worst levels were Vancouver (106.3% of income), Toronto (84.8%), and Victoria (80.2%). These cities are notoriously expensive, but their long-term averages now resemble levels “affordable” cities are currently at.
The bank made special note of those historically affordable markets, now at their respective worst affordability levels ever. A median buyer needs to spend roughly half their income in Ottawa (49.9%), Montreal (53.3%), and Halifax (45.3%).
Canadian Mortgage Payments Rose Much Faster Than Prices Dropped
The bank attributes the erosion of affordability to mortgage payments. The maximum budget shrunk 22% since Q1 2022, but home prices only fell 1.8% over the same period, according to the bank. The average payment for a buyer would be roughly $3,990—more than double the average payment existing homeowners pay.
Monetary policy changes should reduce prices but they take about 18 to 24 months for the impact to be seen. As the impact of the first rate hikes are starting to take hold, the conversation around cutting rates has already begun. Consequently, the narrative of prices rising once again never died—it was only pushed to the backburner.
Canadian Housing Affordability To Improve, But Not Much
RBC expects affordability to start seeing improvements with rate cuts mid-year. Though don’t get too excited, they don’t see much improvement.
“Under our base case scenario, the share of an average household income needed to cover ownership costs would only fall to mid-2022 levels by 2025,” explains Robert Hogue, assistant chief economist at RBC.
Adding, “meaningfully restoring affordability will likely take years in many of Canada’s large markets. In this context, we expect the housing market’s recovery to be slow at first, before gaining momentum as interest rate cuts accumulate.”
In short, the bank sees Canadian housing affordability at the worst level ever… without much improvement on the horizon. Great.
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FAQs
Buying A House In Canada Has Never Been Harder, Years To Correct: RBC. Canada's largest bank is warning that housing has never been less affordable. New data from RBC shows housing affordability is now the worst it has ever been as of Q4 2023.
Why is it so hard to buy a house in Canada? ›
These figures underscore a harsh reality: despite a slight easing of mortgage rates, the income needed to buy a home remains dauntingly high, exacerbated by lingering high property values and stringent mortgage approval conditions, including the mortgage stress test which now uses higher benchmark rates (MoneySense).
What is wrong with housing in Canada? ›
The high cost and scarcity of land are key barriers that prevent homes from being built. These barriers also make homes more expensive to build and more expensive for Canadians. Governments across Canada are sitting on surplus, underused, and vacant lands that are offering no public benefit.
What is the new rule for houses in Canada? ›
The new regulations prohibit the purchase of residential property by foreign investors who are not Canadian citizens or permanent residents. But does not apply to Canadian citizens or permanent residents, who can still purchase property as before.
How long do you have to live in Canada before you can buy a house? ›
Anyone in Canada who can afford the costs of homeownership is eligible to own a home, be that a condo, a duplex, or a single-family house. In fact, Canada has no residence or citizenship requirement on property ownership.
Can I buy a house in Canada as a US citizen? ›
If you're not a Canadian citizen or permanent resident, buying a home in Canada may be off the table for the next couple of years. On January 1st, 2023, the foreign home ownership ban—formally known as the Prohibition on the Purchase of Residential Property by Non-Canadians Act—went into effect in Canada.
Is it cheaper to buy a house in Canada or us? ›
According to WOWA, the average price of a home in Canada in November was CA$646,134, which is $487,540 in U.S. dollars. “Homes in Canada appear to be about 19% more expensive, after the currency conversion,” Hodgson said.
How did Canada's housing market get so bad? ›
The rise of one-person households presents another challenge for the market. In 1961, the average Canadian household contained four people. By 2021, that figure had dropped to 2.4, largely due to the rise of single-resident households. As more people decide to live alone, it creates the need for more housing units.
What is the new housing strategy in Canada? ›
The National Housing Strategy is Canada's 10+year $115+ billion plan to give more Canadians a place to call home. in funding commitments. new housing units created or committed. community housing units protected.
Is Canada becoming unaffordable? ›
Here's the bottom line: the cost of living in the country has become unaffordable for many. In 2023, there were numerous news reports of growing line-ups for food banks, students dumpster-diving, people moving into shelters and tent communities because they cannot find accommodation.
Your entire monthly debt load should not be more than 44% of your gross monthly income. This includes your mortgage payments and all your other debts, such as loan or credit card payments. Use the Mortgage Qualifier Tool to see if you can qualify for a mortgage to buy a home.
What are the rules for foreigners buying property in Canada 2024? ›
The prohibition was set to expire on January 1, 2025; however, on February 4, 2024, the federal government expressed its intent to extend the existing ban on foreign ownership of Canadian housing by an additional two years, bringing it to January 1, 2027.
How long do you have to live in a house in Canada to avoid capital gains? ›
Answer: You Have to Live in a house for at least one year to avoid the capitol gains tax in Canada and qualify for the primary residence exemption from capital gains tax.
What income do you need to buy a house in Canada? ›
Income needed to afford to buy a home in Canada 2023, by city. Prospective homebuyers in Vancouver, British Columbia, and Toronto, Ontario, needed an annual income of over 200,000 Canadian dollars in 2023 to qualify for the average priced home. In Vancouver, this figure was approximately 237,000 Canadian dollars.
Do you get permanent residency if you buy a house in Canada? ›
Buying a house in Canada does not directly lead to obtaining citizenship or permanent residency. However, sustaining life in Canada by purchasing a house is possible, but the process regarding citizenship depends on which program is pursued.
What is the minimum amount of money you need to buy a house in Canada? ›
In Canada, when the purchase price is $500,000 or less, the minimum down payment is five percent. The minimum down payment for homes priced $500,000-$999,999 is five percent for the first $500,000 and 10 percent for the remaining portion. Homes over $1 million require a 20-percent deposit.
Is it hard for Americans to buy property in Canada? ›
In January 2023, the Prohibition on the Purchase of Residential Property by Non-Canadians Act came into place. This stops foreign investors from buying property in Canada and driving house prices up, giving Canadian citizens a chance to purchase property for a reasonable price.
Is it hard to afford a house in Canada? ›
“Housing affordability is a significant problem in Canada—but not one that can be fixed by raising or lowering interest rates. Housing supply has fallen short of housing demand for many years,” noted Macklem.
What is the average income to buy a house in Canada? ›
July 2024: How much do you need to earn to buy a home in Canada?
| City | Average home price in June | Income required in June |
|---|
| Toronto | $1,110,600 | $214,360 |
| Vancouver | $1,207,100 | $231,700 |
| Hamilton | $849,900 | $167,550 |
| Victoria | $872,800 | $171,650 |
9 more rowsAug 19, 2024
Driven by increased immigration and low interest rates, demand outstripped supply, causing some economists to speculate about a housing bubble burst. The housing affordability dream seems distant, especially for millennials.
